On the Numbers

We got a big reminder of the importance of government spending in the Q4 GDP report. The damn military delayed some expenditures for a few months, and it knocked 1.3% of the quarter’s growth rate. If it weren’t for the pikers at the Pentagon, we would have been in the black. GDP = Jobs, and everyone wants jobs, so it would be “patriotic” if the Generals and Admirals got off of their asses and and got back to spending. Right?

As it turns out, the Top Brass can’t move the economy’s needle, at least not compared to other parts of the government that are spending the bucks that keeps things humming.

The pride of the military is the aircraft carrier. We have 11 of them floating around today. There’s good reason to believe these ships, with their monster offensive capability might come in handy, so for that reason, and the good of the economy, we should build some more. These babies cost $12B:

$12B sounds like a lot, but compare it to what Social Security has paid out in just the month of February – $66b went out the door. SS is now spending at the rate of five aircraft carriers a month!

Of course if you’re going to build the odd dozen carriers, you will need lots of new planes to go with them. Each ship needs 70 of the F/A -18 attack bombers.

The F/A-18 goes for $60m, about 90 minutes worth of SS payments. Some other comparisons of military hardware and SS:

We could probably use a few more of these B1 bombers. They must be a blast to fly. They are very expensive, each one costs about two hours of the tab for SS.

The future is drones. What better way to fight a war but behind a TV screen, right? The MQV-1 Predator is just what we need. The good news is that these killers only cost the equivalent of 3 minutes of SS. The Hell Fire Missiles the MQV fires leave a big hole in what ever they hit, the cost is negligible. SS is spending at a rate equal to the cost of 15 Hell Fires – every second.

Okay, I’m kidding a bit with this. But the comparisons are legit. America can’t change spending by reducing the carrier fleet 10%. The cost of the extra ship is a rounding error when compared to SS.

Please don’t take this to read that I want to increase military spending as a vehicle to create jobs. This is just another effort of mine to make some comparisons of what is going on at SS. The numbers are mind boggling. Yet in the next several weeks, as the sequester talks hit the pavement, SS will not be addressed. There will be some talk, but there will be no action.

Aw c’mon, Bruce. Which would you rather have, a US military to protect the US in any of a dozen trouble spots around the world, or millions upon millions of happy, satisfied SS recipients? I’m sure you read all of the same stuff I do about SS put out by various organizations; it’s always framed as if the issues can be solved simply by convincing Congress just to vote for “strengthening” or supporting SS and Medicare. Budgets, expenditures, borrowing, that stuff is just vague concepts that never come up.

Let’s solve three problems at once: the huge cost of SS, the proliferation of assault weapons, and rising Chinese power.

Step 1: End social security;
Step 2: Use the entire propaganda apparatus of the West to push a simple explanation: the Chinese are to blame;
Step 3: Hand out confiscated assault weapons to angry seniors.
Step 4: Drop them off on the Chinese coast with every last piece military hardware we have in support.
Step 5: Profit

I don’t know about US but every immigrant family from mainland China hides their capital and puts home ownership in children’s names so that after 10 years, the parents can collect OAS (SS) and GIS (G’teed income supplement) combined amounts to $1200/mo. They think you are a fool if you don’t game the system to your advantage. We are fools in their hands

Bruce, what you fail to mention about an aircraft carriers cost is the 5000+ personnel that man the ship. Also with every aircraft carrier comes the fleet of destroyers, minesweepers, and frigates that accompany one carrier.

Dear Bruce, please check the news. I just got re-elected and re-inaugurated. We are going to be free loading off your energy / money for another four years. Now stop bitching and start paying more taxes!

Social Security has loaned the Congress over 2 Trillion at 3% interest. annually.for more than 35 years.
$2000000000000 x 0,03 = $60 Billion annually taken by the Congres & the Administration, if it were only simple interest. 35 x 60 = $2 Trillion, 100billion.This money was used for pork barrel projects until the Administration decided to go globally and try to manage everyone’s lives using wars and rumors of wars and crisis after crisis till death due us part. Now the Feds want all pensions put into a Cookine Jar that the Administration can dip into at will, with no records where it went (Iraq) nor oversite. The Administration has infinet wisdom. If you do not believe it, ask them.
LOL

HAARP has the capability of turning all conventional weaponry into scrap metal in a milisecond.
All of this machinery is neccessary to fill in the void of under used capacity utilization…
there are no countries, see “Aurthur Jensen” “NETWORK 1976.

Another silly comparison. Notice no mention of military nor government pensions. No, we are only going to speak to the dumb fools who actually thought that their Social Security deduction was funding a retirement fund. Anyway, as I always say: When you are flat broke, morally and spiritually corrupt, cannot compete economically, have the principles of a Time Square Heroin Addict, and a political class gorging themselves on all the low hanging fruit, big floating guns that kill and intimidate little brown people all over the world are a great comfort. Like a big fat adult wading through a sandbox of children, feeling all high and mighty, just waiting for one of the little brats to give you an excuse to slap it down, that is the US military. I especially love the vapid comments that the US military is protecting Americans. The US military only protects the political class that spawned it.

Yeah, Our military has done a great job protecting us from what??? A couple hundred fundamentalist muslims 10,000 miles away??? What was the price? 4-6 Trillion? Criminee, put a $50,000 bounty on their heads and let the locals take care of them. No Blowback and we save the Taxpayers $3.9-5.9 TRILLION!!!

It fails when enough of the people realize there is no benefit to being productive because the government will provide what they need so long as they just give the government enough power to control all of the money/economy

Bruce….Enjoy your writing! Short note on a related topic. Did you note that a few weeks ago the aircraft carrier stationed off Syria turned tail and steamed about two hundred miles to the west.
“Redeployment”, they said. “Baloney!” I say. It is becoming clearer each day that the carrier is
going the way of the battleship. Russia deployed some dozen or so of their latest cruise missiles
on Syrian soil complete with competent operators. The U.S. Navy has NO defense for this
latest 200 mile, HYPERSONIC killer. The loss of even one carrier to this weapon would be
the ultimate shame and disgrace. The solution…..turn and RUN!

I noticed also Chile’s, Australia’s, Brazil’s, India’s China’s, Japan’s and Germany’s aircraft carriers also redeployed. Oh, wait, that’s right: it is only the American Government who piss away their citizen’s wealth. It must be great being swaddled in an American Flag comforter sucking off Aunt Samantha’s teat.

The important thing to note is that the bulk of SocSec recipients think they are receiving BACK their lifetime’s worth of contributions. They’re wrong, but in an important sense that’s not the point – the overwhelming bulk of retirees think that SocSec is a form of mandatory retirement INSURANCE (what do payroll slips call the deductions?).

That the funds ‘contributed’ (under pain of death) to SocSec have been diverted to general expenditure for over a generation, is neither the fault of, nor known to, the vast bulk of current beneficiaries: that the SocSec ‘treasure chest’ has been profoundly mismanaged (‘invested’ by its managers in ludicrously low-yielding non-fungible government securities) is also neither the fault of, not known to, the beneficiary pool (in fact I would bet that upwards of 80% of ALL contributors to SocSec think it’s their contributions, invested and ‘grown’, that will pay their pensions).

The impending SocSec default (mathematically certain in every country in the West) is symptomatic of the dishonesty of the political class: in much the same way, the likes of GM kept past wages claims down by negotiating gold-plated ‘fixed-benefit’ retirement benefits … only to subsequently seek to renege (by catapulting the propaganda that ‘legacy costs’ – returee health care and pensions – were a crippling economic disadvantage… ignoring the fact that the workers accepted lower-than-otherwise wages in the past in exchange for those legacy costs).

SocSec expropriates roughly one dollar in 8 from all labour earning less than $110k (which is roughly the income cutoff for the top 12% of the income distribution) – to fund promises made to people who contributed to the system for their entire lives, in anticipation of income support in their dotage.

Let’s be clear: I’m an anarchist (actually I’m a kratoclast – the distinction is important), so I detest government waste and corruption… but SocSec is the wrong target: sure, it’s a system based on a Ponzi (or more accurately Madoff) financing structure, however it is also the very last thing upon which .gov should be permitted to renege.

The fact that folks are being encouraged to focus on it, is a typical sneaky misdirection by the political-parasite class and its minions, and you ought not fall for it: if you’re concerned about transfer payments (oddly enough, the one aspect of government redistribution that has a sensible-but-flawed economic basis) you ought to focus on healthcare, education and income support where there is no nexus of expectation between those who fund and those who consume the services.

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About Me

Bruce Krasting
Westchester, NY
United States
I worked on Wall Street for twenty five years. This blog is my take on the financial issues of the day. I was an FX trader during the early days of the 'snake' and the EMS. Derivatives on currencies were new then. I was part of that. That was with Citi. Later I worked for Drexel and got to understand a bit about balance sheet structure and corporate bonds from Mike Milken. I was involved with a Macro hedge fund later. That worked out all right, but it is not an easy road. There was one tough week and I thought, "Maybe I should do something else for a year or two." That was fifteen years ago. I love the markets. How they weave together. For twenty five years I woke up thinking, "What am I going to do today to make some money in the market". I don't do that any longer. But I miss it.